Fed hike may not necessarily lead to continual rises for dollar - FT

Market players are increasingly addressing what this "buy the rumor, sell the fact" tendency means in relation to the U.S. currency and next month’s expected rate rise by the Fed. There is a weighty number of players who have bet fully on policy divergence between the Fed and ECB next month.

Jamie Chisholm from the Financial Times meanwhile suggests the following scenario:

On December 3, the ECB goes in line or beats forecasts for another round of easing.

The next day, the U.S. employment data for November is strong enough to cement expectations of a 25 basis point rate increase by the Fed at its December 15-16 meeting.

The events press the euro through this year’s low around $1.0450, triggering stops and enhancing further talk of parity.

The dollar index jumps to a fresh 12-year high, confirming the breakout of the 94-100 channel in which it has swung for nearly nine months.

The market is already greenback bullish. Scotiabank has said that total long dollar positioning in U.S. futures has more than tripled in the past five weeks to $41.7bn. The DXY’s 14-day relative strength gauge at 65 would undoubtedly burst into "overbought" territory.

Then, the Fed strikes a "dovish hike", explaining it will await to see the economy's reaction.

Dollar bulls may be willing to take profits before the Fed meeting, Chisholm advises.